The iTunes Store at 10: How Apple reinvented the music business

As I write this paragraph, I’m enjoying a playlist that I created from among the thousands of songs on my iPhone, and it’s no big deal. It wasn’t always so simple: Once upon a time, crafting the perfect playlist for your MP3 player felt like an epic project. You had to rip the songs from a CD onto your computer, find sources—legitimate and otherwise—for tracks you didn’t own, and then hope everything was in the right format to play on your portable device. Apple changed all that, thanks to a series of musical moves right at the dawn of the 21st century—not the least of which was the launch of the iTunes Music Store.

It was only ten years ago—on April 28, 2003—that Apple opened the iTunes Store (then called the iTunes Music Store) and changed the way we buy music. The store arrived with just 200,000 tracks; in the ensuing decade, that library has grown to more than 35 million songs, from the Beatles to Jay-Z. You can even download those tracks over your phone if you want—no computer needed. That was not possible before the iTunes Store opened.

Apple’s not fond of reminiscing, but even the company has taken note of iTunes’s anniversary. The store “revolutionized the distribution of digital content,” Peter Oppenheimer, Apple’s chief financial officer, told Wall Street analysts when announcing Apple’s quarterly earnings earlier this week. In addition to those 35 million songs, which are available in 119 countries, the store sells 60,000 movies in 109 countries, and 1.75 million books in 155 countries. By Oppenheimer’s math, the $4 billion in quarterly billings recorded by iTunes in the most recent quarter makes it the largest digital content store in the world.

The iTunes Music Store, then...

Still, the iTunes Store story begins with music. So it’s appropriate that, on the tenth anniversary of the store’s opening, we’re on the cusp of another shift in digital music, with streaming looking to replace downloads as the next listening experience. But before we think about what’s next, let’s look back at what was.

...and now, after Apple added movies, TV shows, and apps to the offerings.

The way we were

Apple wasn’t the first company to think of selling music online. Before the iTunes Music Store hit the scene, you could subscribe to services like Rhapsody, PressPlay, and eMusic that offered a certain number of downloads a month. But most of these songs came with strings attached—limits on what you could do with that music and where you could listen to it.

As a result, many music listeners turned to other avenues for getting their hands on digital songs—namely, the peer-to-peer networks that emerged in the wake of the file-sharing service Napster. Through networks such as Kazaa and LimeWire, you could find and download almost any individual track you wanted. You didn’t have to buy an entire album or deal with digital rights management (DRM) that prevented you from listening on your MP3 player or burning it to a CD. And you didn’t even have to pay for it—which was, in almost every case, illegal.

Many start-ups tried to find the right mix of selection, ease of use, and price to entice listeners into legal digital music, says Russ Crupnick, an analyst with research firm NPD Group. Most failed. It took Apple to find the magic combination.

To put it another way, Apple may not have invented the notion of selling digital music, but it certainly made the process easier than anyone who had tried before it.

Changing the music industry’s tune

Crupnick credits Apple’s digital music ecosystem with making the difference. The company didn’t just launch a store. It built that retail effort directly into its iTunes music software and made sure that the songs you bought from iTunes worked seamlessly with the iPod.

Apple also convinced record labels to buy into some important innovations as well, including letting iTunes shoppers transfer files to more than one device and burn tracks to CDs (with some limitations, of course). Before the iTunes Music Store’s arrival, you could do those things only if you had ripped music from a CD or downloaded a track without DRM.

“Apple dragged the music industry by the scruff of its neck into the digital age,” says Mark Mulligan, music industry analyst and founder of Midia Consulting.

With the iTunes Store, users could download whatever tracks they wanted instead of buying a complete album.

Digital downloads also let listeners pick and choose which songs they wanted, a dramatic change from the album-centric models we’d grown used to from records, tapes, and CDs. “iTunes enabled people to skip the filler tracks and go straight to the killer tracks,” Mulligan says.

Want to know how successful the iTunes Music Store was? Look at all the copycats it spawned. Microsoft, Virgin, Real Networks, Sony, and Walmart all started digital download services. But only iTunes worked with the iPod, and only iTunes remains relevant ten years later. Earlier this month, NPD reported that Apple still enjoys a 63 percent share of the paid music download market. (It enjoys similarly sized chunks of the market for movie and TV downloads—65 and 67 percent, respectively, NPD says.)